Centre for Competition Policy
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Working Paper 12-2
Non linear Pricing and Tariff Differentiation
AUTHORS: Stephen Davies, Catherine Waddams Price & Chris M Wilson
ABSTRACT: Liberalisation of the British household electricity market in which previously monopolised regional markets were exposed to large scale entry, is used as a natural experiment on oligopolistic nonlinear pricing. Consistent with some previous theory, each oligopolistic offered a single two-part electricity tariff, but inconsistent with the theory, the two part-tariffs are heterogeneous in ways that cannot be attributed to asymmetric costs or variations in brand loyalty or market frictions. Instead, the evidence suggests that firms deliberately differentiated their tariff structures resulting in market segmentation according to consumer’s usage.
CITATION: Davies, S., Waddams Price, C. & Wilson,C. (2012) 'Non linear Pricing and Tariff Differentiation',CCP Working Paper 12-2
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